My Two Cents #3: Start Saving

The path to higher education can be challenging as well as expensive. “My Two Cents” is an article series that contains tips to help you make good financial decisions while you’re in school.

Paying for tuition, textbooks, rent and groceries can be a major strain on your wallet. Some might resign themselves to that idea that being poor is the reality of a college student and that money will always be tight. This perception may discourage some from saving at all.

Since her family doesn’t qualify for grants, freshman Heather Raksin avoids taking on too much debt by living at home and working as an office assistant for the marketing division of CSUN’s University Student Union, where she earns an hourly wage of $8. She is luckier than some; after taking care of her major college expenses, she still has enough left over to pay her member dues to her sorority, Alpha Omicron Pi.

Regardless of your situation however, she emphasizes that being efficient with your money can help you get the most out of your income. Heather encourages her peers to adopt the mindset of a working professional; developing good saving habits now will only help you grow your wealth in the future. Heather shares how she is able to save on a college student’s budget.

Heather’s Two Cents

1. Every time you get paid, put $5-$10 in your savings account.

As with academics, don’t procrastinate when it comes to saving.

“The amount I save isn’t very much but a little goes a long way,” Heather says.

Depositing a few dollars in the bank over the course of several months is a manageable goal for even a low-income student. And by setting aside some funds, Heather gives herself options. If an emergency comes up, such as a flat tire, Heather can tap into her savings account instead of asking her parents for money or applying for a credit card in a crunch.

Her savings have also made her more financially independent. When she was living paycheck to paycheck, she had to work a second job as a cashier at the Ralphs Northridge-based grocery store. But with a cushion of savings stashed away, she was able to quit that job and focus more on her academic and social life.

2. To live within your means, have a plan.

Before quitting her second job, Heather made sure her finances were sound. Losing the second source of income meant she had to make some changes.

“It took a little time to adjust my lifestyle and mindset from ‘rolling in dough’ Heather to ‘still frugal but fun’ Heather,” she explains.

Heather uses Microsoft Excel to log all her expenses in to spreadsheets and categorize them as essential or nonessential. For instance, bills are essential. But since she’s discovered cheaper ways to get around — such as carpooling, public transportation and biking — she realizes that gas for her car is not necessarily a priority.

“Gas is more lifestyle-based,” she says.

Besides recognizing nonessential expenses such as gas and eating out, the key to Heather’s plan was finding out what is considered living within her means. All necessary expenses should come first and what’s left over — what Heather calls lifestyle spending — gets cut if she doesn’t have the money for it. For instance, instead of visiting coffeehouses, Heather makes her own caffeinated beverages at home.

Although it was difficult at first, eliminating extras has become second nature to her. Being responsible about money doesn’t have to be a negative experience. In fact, Heather discovered that planning allows her to facilitate more social activities and fun outings. For example, sorority dues are expensive. But Heather’s budget allows her to work that nonessential expense into her life without throwing her finances out of whack.

“I can pay my sorority dues every month,” Heather says, “and still have some money left over for gas, shopping and food.”

In addition to Microsoft Excel, Heather suggests using a visual aid such as a financial planning notebook, which you can pick up at any bookstore, or a large whiteboard to chart a financial plan. Websites such as www.cashcourse.org allow you to create a budget for free.

Heather also recommends using a smartphone and mobile apps to set reminders to track expenses. Nowadays most bank accounts allow you to sign up for automatic deposit. Automatically depositing some money from your paycheck into your savings account at the beginning of each month is a convenient and effective way to build up your savings.